Spreadex Market Update

Huawei trade twist dampens open, sterling at 3-month lows, Thomas Cook walloped by Brexit



It’s hard to keep up with the Trump White House at the moment.

After the damaging trade war escalation that dominated either side of the weekend, the markets were granted a reprieve on Wednesday as reports came out suggesting the US was prepared to delay tariffs on cars from Europe and Japan.

And then the President zigged when it looked like he was zagging, declaring a national emergency to protect US computer networks from ‘foreign adversaries’ – i.e. a big middle finger to China via an attack on Huawei. The latter, alongside 70 of its affiliates, is now on the Entity List, meaning it will require official US government approval to buy crucial parts and components from American companies.

Though not enough to completely erase the auto tariff delay-bump received yesterday afternoon, the European markets were nevertheless concerned that the US is potentially opening up another front to fight this trade war on. The FTSE fell 0.4%, dragging it away from 7300, while the DAX lost 60 odd points, pushing the German bourse back under 12050.

Away from the trade tensions, sterling continued to fall on Thursday. With the 1922 Committee still trying to figure out a way to get rid of Theresa May and cross-party talks dying a slow and painful death – not to mention the prospect of another high-risk Brexit vote in the first week of June – the pound slipped 0.2% against the dollar and the euro, hitting fresh 3-month lows against both.

In case investors were in need of it, Thomas Cook provided a handy reminder of how much the ongoing Brexit uncertainty is costing on Thursday, as it unveiled a horrendous half year pre-tax loss of £1.456 billion. The bulk of that came as the company wrote down the value of part of the business by £1.1 billion, blaming a ‘challenging’ trading environment that has seen UK customers delay their summer holiday plans because of the lack of clarity surrounding the EU exit. It should come as no surprise that Thomas Cook also warned that its profits for the full year would be hit, sending the stock 18.5% lower to just 18.75p – a year ago to the day it was trading at £1.45.

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